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To cut through some of the confusion surrounding bitcoin, we need to separate it into two components. On the one hand, you have bitcoin-the-token, a snippet of code that represents ownership of an electronic concept type of like a digital IOU. On the other hand, you've got bitcoin-the-protocol, a dispersed network that maintains a ledger of balances of bitcoin-the-token.

The system enables payments to be sent between users without passing via a central authority, such as a bank or payment gateway. It is created and held electronically. Bitcoins arent printed, like dollars or euros theyre produced by computers all around the planet, using free software.

It was the first example of what we call cryptocurrencies, a growing strength class that shares some characteristics of traditional currencies, together with verification based on cryptography.

A pseudonymous software programmer going by the name of Satoshi Nakamoto suggested bitcoin in 2008, within an electronic payment method based on mathematical evidence. The idea was to generate a means of exchange, independent of any central power, that could be transferred electronically in a secure, verifiable and immutable manner.

Bitcoin can be used to pay for things electronically, if the two parties are willing. In that sense, its similar to conventional dollars, euros, or yen, which are also traded digitally.

Bitcoins most important feature is that it is decentralized. No single institution controls the bitcoin network. It's maintained by a group of volunteer coders, and run through an open network of dedicated computers spread around the world. This attracts individuals and groups who are uncomfortable with all the control that banks or government institutions have over their money. .

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Bitcoin solves the dual spending issue of electronic currencies (in which digital assets can readily be copied and re-used) through an ingenious combination of cryptography and economic incentives. In electronic fiat currencies, this function is fulfilled by banks, which gives them control over the traditional system. Together with bitcoin, the integrity of the transactions is maintained by a distributed and open network, owned by no-one. .

Fiat currencies (dollars, euros, yen, etc.) have an unlimited supply central banks can issue as many as they want, and can try to manipulate a currencys value relative to other people. Holders of this currency (and especially citizens with little alternative) bear the price.

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With bitcoin, on the other hand, the distribution is closely controlled by the underlying algorithm. A small number of new bitcoins trickle every hourand will continue to do so at a diminishing rate until a max of 21 million has been reached. This makes bitcoin more attractive as an asset in theory, if demand grows and the distribution remains the same, the value will increase. .

While senders use this link of traditional electronic payments are usually identified (for verification purposes, and to comply with anti-money laundering and other legislation), users of bitcoin in concept function in semi-anonymity. Since there's absolutely no central validator, users do not need to identify themselves when sending bitcoin to another user. When a transaction request is filed, the protocol assesses all prior transactions to confirm that the sender has the necessary bitcoin as well as the ability to send them.

In practice, every user is identified by the address of his or her pocket. Transactions can, with a little effort, be tracked this way. Also, law enforcement has developed approaches to identify consumers if necessary.

Furthermore, most exchanges are required by legislation to perform identity checks on their clients before they're permitted to purchase or sell bitcoin, facilitating another way that bitcoin utilization can be monitored. Since the network is transparent, the advancement of a particular transaction is observable to all.

This is because there is no central adjudicator that can say okay, return the money. If a transaction is listed on the network, and when greater than an hour has passed, it is impossible to change.

While this may disquiet some, it does mean that any transaction on the bitcoin network cannot be tampered with.

The smallest unit of a bitcoin is referred to as a satoshi. It is one hundred millionth of a bitcoin (0.00000001) at todays prices, roughly one hundredth of a cent. This may conceivably enable microtransactions that traditional electronic money cannot.

Read to find out how bitcoin transactions are processed and how bitcoins are mined, what it can be utilized for, as well as how you can purchase, sell and store your bitcoin. In addition, we explain a few alternatives to bitcoin, as well as how its underlying technology the blockchain works. .

Bitcoin is a digital currency, also known as a cryptocurrency. It had been invented in 2008 by an anonymous person or group named Satoshi Nakamoto.